ALL BUSINESS UNIT 2 VOCABULARY Flashcards
Barriers to entry
Factors which make it difficult or impossible for businesses to enter a market and compete with existing producers.
Cartel
A group of businesses which join together to agree on pricing and output in a market in an attempt to gain higher profits at the expense of customers.
Colluding
Where several businesses make agreements amongst themselves which benefit them at the expense of either rival businesses or customers.
Market Structures
The characteristics of a market, such as the size of the barriers to entry to the market, which determine the behaviour of businesses within the market.
Anti-competitive or restrictive practices
Attempts by firms to prevent or restrict competition.
Contract of Employment
A written agreement between an employer and employee, in which each has certain obligations.
Discrimination
Favouring one person over another usually on the basis of race, gender, age, etc.
Employment Tribunal
A court that deals with cases involving disputes between employers and employees.
National Minimum Wage
A wage rate set by the government below which it is illegal to pay people at work.
Unfair Dismissal
The illegal dismissal of a worker by the business.
Appreciation of a currency
A rise in the value of a currency.
Base Rate
The rate of interest around which a bank structures other interest rates.
Boom
The peak of the economic cycle where GDP is growing at its fastest.
Consumer Price Index (CPI)
A common measure of price changes used in the EU.
Deflation
A fall in general price levels.
Depreciation
A fall in the value of a currency.
Downturn
A period in the economic cycle, where GDP grows but more slowly.
Economic, trade and business cycle
Regular fluctuations in the level of output in the economy.
Exchange Rate
The value of one currency in terms of another.
Government Expenditure
The amount spent by the government on its provision of public services.
Fiscal Policy
Using changes in taxation and government expenditure to manage the economy.
Gross Domestic Product (GDP)
A common measure of national income, output or employment.
Index-linked
The linking of certain payments such as benefits, to the rate of inflation.
Inflation
A general rise in prices.
Monetary Policy
Using changes in the interest rate and money supply to manage the economy.
Recession
A less severe form of depression.
Recover or upswing
A period where economic growth begins to increase again after a recession.
Slump or depression
The bottom of the economic cycle where GDP starts to fall with significant increases in unemployment.
Taxation
The charges made by the government on the activities, earnings and incomes of businesses and individuals.
Quality
Features of a product that allow it to satisfy customers’ needs. It may refer to some standard of excellence.
Quality Assurance
A method of working for businesses that take into account customers’ wants when standardizing quality.
Quality Chains
When employees form a series links between suppliers and customers in a business, both internally and externally.
Statistical Process Control
The collection of data about the performance of a particular process in the business.
Total Quality Management (TQM)
A managerial approach that aims to improve the effectiveness, flexibility, and competitiveness of the business.
Buffer stocks
Stocks held as a precaution to cope with unforeseen demand.
Kanban
A card or an object that acts as a signal to move or provide resources in a factory.
Lead time
The time between placing the order and the delivery of goods.
Re-order level
The level of current stocks when new orders are placed.
Re-order quantity
The amount of stock ordered when an order is placed.
Stock Rotation
The flow of stock into and out of storage.
Work-in-progress
Party finished goods.
Capacity Utilisation
The use that a business makes of its resources.
Excess or surplus capacity
When a business has too many resources, such as labour and capital, to produce its desired level of output.
Full capacity
The point where a business cannot produce any more output.
Mothballing
Leaving machines, equipment or building spaces unused, but maintained, so that they can be brought back into the business if necessary.
Over-utilisation
The position where a business is running at fully capacity and ‘straining’ resources.
Rationalisation
Reducing the number of resources put into the production process, usually undertaken because a business has excess capacity.
Under-utilisation
The position where a business is producing at less than full capacity.
Batch production
A method that involves completing one operation at a time on all units before performing the next.
Capital Intensive
Production methods that make more use of machinery relative to labour.
Capital Productivity
The amount of output each unit of capital produces.
Cell Production
Involves producing a family of products in a small self-contained unit within a factory.
Cell production
Involves producing a family of products in a small self-contained unit within a factory.
Division of Labour
Specialisation in specific tasks or skills by an individual.
Downsizing
The process of reducing capacity usually by laying off staff.
Efficiency
Producing a level of output where average cost is minimised.
Flow Production
Large-scale production of a standard product
Job production
A method of production that involves employing all factors to complete one unit per output at a time.
Kaizen
A Japanese term that means ‘continuous improvement’.
Labour intensive
Production methods that make more use of labour relative to machinery.
Labour productivity
The amount of output each unit of labour produces.
Lean production
An approach to operations that focuses on the reduction of resource use.
Outsourcing
Giving work to sub-contractors to reduce costs.
Production
The transformation of resources into goods and services.
Productivity
The output per unit of input per time period.
Specialisation
The production of a limited range of goods.
Standardisation
Using uniform resources and activities to produce uniform products.
Administration
A failing business appoints a specialist to rescue the business or wind it up.
External Factors
Factors beyond the control of the business that cause it to collapse.
Internal Factors
Factors that businesses are able to control that cause it to collapse.
Overtrading
The situation where a business does not have enough cash to support its production and sales, usually because it is growing too fast.
Acid Test Ratio
Similar to current ratio but excludes inventory. A more severe test of liquidity.
Assets
Resources that belong to the business.
Capital
Money put into the business by the owners.
Current assets
Assets that can be converted into cash within one year.
Current liabilities
Money owed by the business that must be repaid within one year.
Current ratio
Assesses whether or not a business has enough resources to meet any debt that arises in the next 12 months. It is found by dividing current liabilities by current assets.
Intangible Assets
Non-physical assets, such as brand names, patents and customer lists.
Inventories
Stock such as raw materials and finished goods held by the business.
Liabilities
Money owed by the business
Liquidity
The ease with which assets can be converted into cash.
Net assets
Total Assets - Total Liabilities.
Non-current assets
Long-term resources that will be used by the business repeatedly over more than a year.
Non-current liabilities
Money owed by the business for more than one year
Shareholders’ equity
The amount of money owed by the business to the shareholders.
Statement of financial position
A summary of a particular point in time of the value of a firm’s assets, liabilities and capital.
Trade and other payables
Money owed by the business to suppliers and utilities, for example. Sometimes called trade creditors.
Trade and other receivables
Money owed to the business by customers and any prepayments made by the business.
Working capital
The funds left over to meet day-to-day expenses after current debts have been paid. It is calculated by subtracting current liabilities from current assets.
Amortisation
The writing off of an intangible asset.
Cost of sales
The direct costs of a business.
Exceptional Costs
A one-off cost, such as a large debt.
Gross Profit
The difference between revenue and the cost of sales.
Gross Profit Margin
Gross profit / Revenue * 100
Operating Profit
The difference between gross profit and other operating expenses
Operating Profit Margin
Operating profit / Revenue * 100
Profit For The Year/ Net Profit
The difference between operating profit and exceptional costs
Profit for the year margin/Net Profit Margin
Profit of the year / Revenue * 100
Statement of Comprehensive Income
A financial document that outlines a business’ income and expenditure over a particular period of time (usually one year).
Revenue
The total income of a business resulting from the sales of goods or services.
Budget
A quantitative economic plan prepared and agreed in advance.
Budgetary Control
A business system that involves making future plans by comparing the actual figure with the budgeted figure and then investigating the causes of any differences.
Historical Figures
Quantitative information based on past trading records.
Production Cost Budget
A business’ planned production costs for a future period of time.
Sales Budget
A business’ planned sales for a future period of time.
Variance
The difference between actual figure and the budgeted figure.
Variance Analysis
The process of calculating variances and attempting to identify their causes.
Zero-based budgeting
A system of budgeting where no money is allocated for costs unless they can be justified by the fund holder (they are given a zero value).
Break-Even
When a business generates just enough revenue to cover its total costs.
Break-Even Chart
A graph containing the total cost and total revenue lines, illustrating the break-even point.
Break-Even Output
The output a business needs to produce so that its total revenue and total costs are the same.
Break-Even Point
The point at which total revenue and total costs are the same.
Contribution
The amount of money left over after variables costs have been subtracted from revenue.
Margin of Safety
The range of output between the break-even point and the current level of output, over which profit is made.
Average Cost/Unit Cost
The cost of producing one unit, calculated by dividing the total cost by the output.
Fixed Cost
A cost that does not change
Long run
The time period where all factors of production are variable.
Profit
The difference between total costs and total revenue. It can be negative.
Sales Revenue
The value of output sold in a particular time period. It is calculated by time x quantity of output.
Sales Volume
The quantity of output sold in a particular time period.
Semi-variable cost
A cost that consists of both fixed and variable elements.
Short run
The time period where at least one factor of production is fixed.
Total Cost
The entire cost of producing a given level of output.
Total Revenue
The amount of money the business receives from selling output.
Variable Cost
A cost that changes as output changes.
Disposable Income
The amount of income remaining after taxes and expenses have been deducted from wages.
Consumer Trends
The habits or behaviours of consumers that determine the goods and services they buy.
Economic Growth
The rise in the output of an economy as measured by Gross Domestic Product (GDP), usually as a percentage.
Economic Variables
Measures within the economy which have effects on businesses and consumers. Examples include unemployment, inflation and exchange rates.
Extrapolation
Forecasting future trends based on past data.
Forecasting
A business process, assessing the probable outcome using assumptions about the future.
Sales Forecast
Projection of future sales revenue, often based on previous data sales.
Time Series Data
A method that allows a business to predict future levels from past figures.
Business Plan
A plan for the development of the business, giving details such as the products to be made, resources needed, and forecasts such as costs, revenues and cash flows.
Cash-flow forecast
The prediction of all expected receipts and expenses of a business over a future period of time, which shows the expected cash balance at the end of each month.
Cash Inflows
The flow of money into a business.
Cash Outflows
The flow of money out of a business.
Net Cash Flow
The difference between the cash flowing in and the cash flowing out of a business in a given time period.
Solvency
The degree to which a business is able to meet its debts when they fall due.
Collateral
An asset that might be sold to pay a lender when a loan cannot be repaid.
Incorporated business
A business model in which the business and its owners have separate legal identities.
Limited Liability
A legal status that means shareholders can only lose the original amount they invested in a business.
Long-term Finance
Money borrowed for more than one year.
Rights Issue
Issuing new shares for existing shareholders at a discount.
Short-term Borrowing
Money borrowed for 12 months or less.
Undercapitalised
A business not raising enough capital when setting up.
Unincorporated Businesses
A business model in which there is no legal difference between the owners and the business.
Unlimited Liability
A legal status which means that business owners are liable to all business debts.
Capital
The money provided by the owners of a business.
Capital Expenditure
Spending on business resources that can be used repeatedly over a period of time.
Internal Finance
Money generated by the business or its current owners.
Retained Profit
Profit after tax is ‘ploughed back’ into the business.
Revenue Expenditure
Spending on business resources that have already been consumed or will be very shortly.
Sales and leaseback
The practice of selling assets, such as property or machinery and leasing them back to the buyer.
Authorised share capital
The maximum amount that can be legally raised.
Bank Overdraft
An agreement between a business and a bank that allows a business to spend more money than it has in its account.
Capital Gain
The profit made from selling a share for more than it was bought.
Crowd Funding
Where a large number of individuals invest in a business or project on the internet, avoiding the use of a bank.
Debenture
A long-term loan to a business.
Equities
Another name for an ordinary share.
External Finance
Money raised from outside the business.
Issued Share Capital
Amount of current share capital arising from the sales of shares.
Lease
A contract to acquire the use of resources such as property or equipment.
Peer-to-peer lending (P2PL)
Where individuals lend to other individuals without prior knowledge of them, on the internet.
Permanent Capital
Share capital that is never repaid by the company.
Secured Loans
A loan where the lender requires security, such as property, to provide protection in case the borrower defaults.
Share Capital
Money introduced into the business through the sales of shares.
Unsecured Loans
Where the lender has no protection if the borrower fails to repay the money owned to them.
Venture Capitalism
Providers of funds for small or medium-sized companies that may be considered too risky for other investors.
